Market Commentary (After Market Close): Stocks Sink as Sellers Exert Control

The heady gains that followed a better-than-expected GDP headline number in the previous session proved unsustainable as sellers returned to action Friday to send stocks sharply lower. Losses were broad-based as nearly 95% of the issues in the S&P 500 logged losses, which contributed to the worst weekly loss in five months for the broad market measure.

Financials were the worst hit of the major sectors. They had actually helped lead broad-market gains in the previous session, but plummeted to a 4.8% loss this time around. Within the sector, life and health insurers shed 6.1%. Diversified financial services stocks dropped 6.3%.

Materials stocks and energy stocks were also hit hard, however. The two sectors fell 3.8% and 3.5%, respectively. Their case was worsened by the drop in commodities and energy prices amid a stronger dollar, which advanced 0.6% against a basket of foreign currencies. That marked the greenback's sixth gain in seven sessions.

Even integrated oil giant Chevron (CVX 76.54, -1.41) couldn't shake free from sellers, despite posting better-than-expected third quarter earnings of $1.72 per share. Not a single sector in the S&P 500 proved immune to this session's selling effort. In turn, each finished with a loss of at least 1%. That helped take the S&P 500 well below its 50-day moving average of 1052 and hand the stock market its first monthly loss since an 11% monthly drop in February.

There wasn't any immediate cause for this session's decline, though some market watchers point out that stocks have had an increasingly difficult time of climbing higher since making their strong runs in recent months. Others have pointed out that there may be some month-end portfolio rebalancing and window dressing accounting for the recent whipsaw trade.

Nonetheless, the concerted selling effort brought about a spike in volatility. That sent the Volatility Index, often dubbed the Fear Gauge, up 24%, which marks its sharpest single-session spike by percent this year. Moreover, the VIX now stands at its highest level since July. Complementing the spike in the VIX is an elevated put-to-call ratio of 1.2, which is indicative of positioning for downside protection.

The broader market's negative bias this session overshadowed what was generally a solid batch of economic data. Specifically, personal income for September was flat, as expected, and spending fell 0.5%, as expected. That data was already included in the third quarter GDP data that was released Thursday, though.

The October Chicago PMI bounced to 54.2, which bested the 49.0 consensus, but the report was largely ignored.